If you want to build your dream home in the Peach State, you may need more than a traditional mortgage. Thankfully, there are numerous construction loan programs to help you finance building costs, including single-close construction loans that turn into permanent conventional loans after the construction period.
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In this post, we’ll explain the steps necessary to secure a home construction loan in Georgia so you can design the perfect home for your family.
Step 1: Assemble Your Team
Construction projects are a major endeavor, so it’s crucial to have a strong team to help with all aspects of building, from financing to the final touches.
Experienced Lender – Not every bank, credit union, or private lender offers construction project loans. You must ensure you choose one with a good working knowledge of loans who can streamline the mortgage process.
Qualified Builder – You should only work with a licensed, insured, and highly rated builder. Otherwise, you may struggle to access the funds and find your house is not structurally sound.
Knowledgeable Real Estate Agent – While not strictly necessary, a realtor can help with local decision-making, such as which areas are best for primary residences and investment properties.
Financial Advisor or Consultant – To ensure you can finance your new house, consult a financial advisor who can run the numbers on your behalf.
Step 2: Prepare Your Financials
The application process for a construction loan in Georgia works similarly to a conventional one. You need to ensure you qualify by getting pre-qualified. Typically, you need higher credit scores for custom home loans. They are slightly riskier with a lower debt-to-income ratio (DTI).
Every company is different, but most lenders want a borrower to meet these metrics:
- Credit Score: 680
- Down Payment: 20% to 30%
- DTI: no more than 45%
Before applying, gather financial documents such as your tax returns, pay stubs, and bank statements. You’ll also want proof you can afford the lender’s requested down payment.
Step 3: Choose Your Land and Plans
Next, you need to find the perfect location for your new home. Work with an architect or home designer who will assess the ground and develop a house plan.
Once complete, you will take the plans to a builder, who will provide detailed cost estimates. Don’t forget to factor in additional fees like permits, inspections, and surveys.
Step 4: Submit Your Loan Application to Mortgage Loan Officers
The next step is to complete and submit your application, including details about the construction process and the expected budget. Homeowners must provide the builder’s license and insurance information and prove they have the proper permits and approval from the county.
As with other mortgages, you can choose between mortgages with a fixed rate or a variable rate. Financing options for your construction loan include:
- Federal Housing Administration (FHA)
- Department of Veterans Affairs (VA)
- United States Department of Agriculture (USDA)
- Conventional
One-time close construction loans mean you only have to pay one set of closing fees, and they are a very popular option among borrowers. Our team at District Lending can help you determine the type of home construction loan you need and match you to lenders who offer affordable products.
Step 5: The Underwriting Process for Construction Loans
An underwriter will investigate your construction loan, including your financial details, the construction plans, and the necessary title and insurance information. The investigation includes appraising the land and the expected home value after the completion. If everything is satisfactory, the bank will approve your loan, putting you well on your way to constructing your new home.
Step 6: Closing and Disbursement of Funds
At this time, you’ll review the disclosures about your mortgage payments and obligations and make the down payment. The lender will create a schedule for when the money will be paid to the builder, and you or the builder will pay the builder’s risk insurance. If you have a one-time closing loan, payment of all closing costs is upfront, though you will still have to sign when the loan is converted.
Step 7: The Construction Phase
When working with a construction-to-permanent loan, you’ll make interest-only payments during construction. Before signing off on further disbursements, the lender will require regular inspections to ensure the construction goes smoothly.
At each stage, the builder will make a draw request, and the lender will approve the construction before dispersing money. As the borrower, you must monitor the build and ensure the builder stays within the requested budget.
Step 8: Completion and Conversion to a Permanent Loan
The home will be inspected one last time, and you’ll be issued a certificate of occupancy. The construction loan will then be converted to a traditional mortgage, and you’ll begin making payments. You and the mortgage servicer will meet again to schedule the final close, where you will review all the specifics of your permanent loan terms, like payments and penalties. If there is any money left over from the construction loan, it will be applied to your total balance.
Conclusion: Secure Construction Loan Georgia
Construction loans are an affordable and convenient way to afford beautiful property in sunny Georgia. Our team at District Lending will help you find financing you can afford, including a lower rate, interest-only payments, and one-time close options.
Learn how much you can afford by getting a free quote online, or contact us to talk about your custom home construction dreams. We’re here to assist you in finding a suitable construction-to-permanent loan option for your specific needs.
